Food and Drug Administration: Revenue Information on Certain	 
Companies Participating in the Medical Device User Fee Program	 
(30-MAR-07, GAO-07-571R).					 
                                                                 
The Food and Drug Administration (FDA) is responsible for	 
approving medical devices--such as catheters and artificial	 
hearts--to provide reasonable assurance of their safety and	 
effectiveness. As part of this responsibility, FDA, an agency	 
within the Department of Health and Human Services (HHS), reviews
applications submitted by medical device companies for devices	 
they wish to market in the United States, including devices that 
are new or those that constitute modifications to already	 
approved devices. Prior to 2002, members of Congress,		 
representatives of the medical device industry, and others	 
expressed concern that FDA lacked the resources necessary to	 
complete such reviews in a timely manner to ensure that patients 
have access to useful, possibly life-saving, devices. In	 
response, Congress enacted the Medical Device User Fee and	 
Modernization Act of 2002 (MDUFMA), which authorizes FDA to	 
charge user fees for some device applications and not others.	 
Revenues from the user fees, together with additional		 
appropriations that were also authorized by MDUFMA, were intended
to provide additional resources to FDA for improving the	 
timeliness of device review. To help ensure that user fees are	 
not financially prohibitive for small medical device companies,  
MDUFMA provides that companies qualifying as small businesses in 
a given fiscal year can receive fee discounts and, in certain	 
cases, fee waivers. To qualify as a small business under MDUFMA, 
a company must submit information to FDA demonstrating that its  
annual revenues--including the revenues of any affiliate,	 
partner, or parent firm--are at or below a certain threshold.	 
MDUFMA originally set the threshold for small business		 
qualification at $30 million, and in 2005, the threshold was	 
increased to $100 million by the Medical Device User Fee	 
Stabilization Act of 2005 (MDUFSA). All companies qualifying as  
small businesses under the $100 million threshold pay reduced	 
fees when submitting applications subject to user fees. 	 
Originally, MDUFMA also provided that companies qualifying as	 
small businesses receive a fee waiver the first time ever they	 
submit one of certain applications that generally have higher	 
fees. While MDUFSA raised the small business threshold to $100	 
million, it provided that only companies with annual revenues of 
$30 million or less could continue to receive fee waivers. FDA's 
authority to collect user fees will sunset October 1, 2007.	 
Congress asked us to provide annual revenue information for	 
companies participating in the MDUFMA user fee program to assist 
Congress as it determines whether changes to the threshold for	 
small business qualification are needed. Revenue information is  
available for companies that qualify as small businesses, which  
submit annual revenue information to FDA, and publicly traded	 
companies, which register securities with, and submit annual	 
revenue information to, the Securities and Exchange Commission	 
(SEC). In this report, we provide revenue information for (1)	 
companies that qualified as small businesses under the MDUFMA	 
user fee program in fiscal year 2006 and (2) companies publicly  
traded in the United States that submitted device applications	 
subject to user fees and did not qualify as small businesses	 
under MDUFMA in fiscal year 2006.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-571R					        
    ACCNO:   A67568						        
  TITLE:     Food and Drug Administration: Revenue Information on     
Certain Companies Participating in the Medical Device User Fee	 
Program 							 
     DATE:   03/30/2007 
  SUBJECT:   Data collection					 
	     Eligibility criteria				 
	     Federal regulations				 
	     Medical equipment					 
	     Pharmaceutical industry				 
	     Product safety					 
	     Regulatory agencies				 
	     Safety regulation					 
	     Small business					 
	     Statistical data					 
	     User fees						 

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GAO-07-571R

   

     * [1]PDF6-Ordering Information.pdf

          * [2]Order by Mail or Phone

March 30, 2007

The Honorable Joe Barton
Ranking Minority Member
Committee on Energy and Commerce
House of Representatives

Subject: Food and Drug Administration: Revenue Information on Certain
Companies Participating in the Medical Device User Fee Program

Dear Mr. Barton:

The Food and Drug Administration (FDA) is responsible for approving
medical devices--such as catheters and artificial hearts--to provide
reasonable assurance of their safety and effectiveness. As part of this
responsibility, FDA, an agency within the Department of Health and Human
Services (HHS), reviews applications submitted by medical device companies
for devices they wish to market in the United States, including devices
that are new or those that constitute modifications to already approved
devices. Prior to 2002, members of Congress, representatives of the
medical device industry, and others expressed concern that FDA lacked the
resources necessary to complete such reviews in a timely manner to ensure
that patients have access to useful, possibly life-saving, devices. In
response, Congress enacted the Medical Device User Fee and Modernization
Act of 2002 (MDUFMA),^1 which authorizes FDA to charge user fees for some
device applications and not others. Revenues from the user fees, together
with additional appropriations that were also authorized by MDUFMA, were
intended to provide additional resources to FDA for improving the
timeliness of device review. In fiscal year 2005, FDA collected
approximately $31 million in user fees from device applications.

Under the MDUFMA user fee program, fees for individual medical device
applications range from under $5,000 to more than $250,000.^2 Higher fees
are charged for applications that require more review. One of the
applications with a higher user fee--$259,600 in fiscal year 2006--is the
Original Premarket Approval (PMA) application. A PMA is submitted for a
device that supports or sustains human life, is of substantial importance
in preventing impairment of human health, or presents a potential
unreasonable risk of illness or injury. One of the applications with a
lower user fee--$3,833 in fiscal year 2006--is a Premarket Notification. A
Premarket Notification is submitted for devices that are substantially
equivalent to a legally marketed device that was not subject to premarket
approval.

^1Pub. L. No. 107-250, 116 Stat. 1588.

^2MDUFMA includes provisions for user fee amounts for fiscal years 2006
and 2007.

To help ensure that user fees are not financially prohibitive for small
medical device companies, MDUFMA provides that companies qualifying as
small businesses in a given fiscal year can receive fee discounts and, in
certain cases, fee waivers. To qualify as a small business under MDUFMA, a
company must submit information to FDA demonstrating that its annual
revenues--including the revenues of any affiliate, partner, or parent
firm^3--are at or below a certain threshold. MDUFMA originally set the
threshold for small business qualification at $30 million, and in 2005,
the threshold was increased to $100 million by the Medical Device User Fee
Stabilization Act of 2005 (MDUFSA).^4 All companies qualifying as small
businesses under the $100 million threshold pay reduced fees when
submitting applications subject to user fees. In 2006, for example, the
discounted PMA fee was $98,648, or 38 percent of the full fee of $259,600.
Originally, MDUFMA also provided that companies qualifying as small
businesses receive a fee waiver the first time ever they submit one of
certain applications that generally have higher fees.^5 While MDUFSA
raised the small business threshold to $100 million, it provided that only
companies with annual revenues of $30 million or less could continue to
receive fee waivers.

FDA's authority to collect user fees will sunset October 1, 2007. You
asked us to provide annual revenue information for companies participating
in the MDUFMA user fee program to assist Congress as it determines whether
changes to the threshold for small business qualification are needed.
Revenue information is available for companies that qualify as small
businesses, which submit annual revenue information to FDA, and publicly
traded companies, which register securities with, and submit annual
revenue information to, the Securities and Exchange Commission (SEC).^6 In
this report, we provide revenue information for (1) companies that
qualified as small businesses under the MDUFMA user fee program in fiscal
year 2006 and (2) companies publicly traded in the United States that
submitted device applications subject to user fees and did not qualify as
small businesses under MDUFMA in fiscal year 2006.

^3Specifically, MDUFMA requires companies to submit their most recent
federal income tax returns to FDA so that FDA can verify the "gross sales
or receipts" reported by the company and any affiliate, partner, or parent
firm.

^4Pub. L. No. 109-43, S 2(a)(3)(B)(iii), 119 Stat. 439, 440.

^5These applications include the PMA, the Biologics License Application
(BLA), the Premarket Report, and the Product Development Protocol (PDP).
The user fee for each of these applications was $259,600 in fiscal year
2006.

^6While companies seeking small business qualification must submit to FDA
"gross sales or receipts" information from their most recent U.S. tax
returns, companies that are publicly traded must submit to SEC gross
revenue information in a financial income statement. Both gross sales or
receipts and gross revenues are general measures of annual revenue.
However, annual revenues reported on a company's financial statement filed
with SEC may not be identical to gross sales or receipts reported to the
Internal Revenue Service for the same period. Taxable income reported on
the tax return is computed in accordance with prescribed federal tax
regulations and rules, whereas, pretax financial income reported on
financial statements filed with SEC is measured in accordance with
generally accepted accounting principles (GAAP). Because tax regulations
and GAAP are different, taxable income and pretax financial income can
differ.

To provide annual revenues for companies qualifying as small businesses
under the MDUFMA user fee program in fiscal year 2006, we obtained annual
revenue data from FDA on these companies. To gather information about the
MDUFMA user fee program, we interviewed FDA officials as well as
representatives of the Medical Device Manufacturers Association. To
provide annual revenues for companies publicly traded in the United States
that submitted device applications subject to user fees and did not
qualify as small businesses in fiscal year 2006, we obtained (1) company
information from FDA on all device applications the agency received in
fiscal year 2006 that were subject to user fees and (2) SEC data compiled
by two private data vendors, Mergent and Audit Analytics. We then matched
companies submitting device applications to publicly traded companies in
the Audit Analytics and Mergent databases.^7 We assessed the reliability
of FDA data by conducting interviews with FDA staff to understand how FDA
collects and uses the data. We assessed the reliability of data from the
two private data vendors by comparing actual financial information in SEC
filings with financial information provided by the vendors for a sample of
companies. Our results cannot be generalized to all companies that
submitted device applications in fiscal year 2006. Together, companies
qualifying as small businesses and publicly traded companies that were not
qualified small businesses were responsible for about 50 percent of the
approximately 4,500 device applications subject to user fees that were
submitted in fiscal year 2006. We were unable to obtain revenue
information for companies responsible for submitting the remaining 50
percent of applications. Because we identified applications submitted by
companies that qualified as small businesses and publicly traded companies
that did not qualify as small businesses, the remaining applications were
likely submitted by private companies that did not qualify as small
businesses. We were unable to identify the number of these companies.
Enclosure I contains a more detailed description of our methodology. We
conducted our work from October 2006 through March 2007 according to
generally accepted government auditing standards.

Results in Brief

Of the 697 companies that qualified as small businesses under the MDUFMA
user fee program in fiscal year 2006, 656, or about 95 percent, had
revenues at or below $30 million--the threshold for small business
qualification originally set by MDUFMA in 2002. Of the 41 companies that
had revenues above $30 million but at or below the current threshold of
$100 million, 35 had revenues above $30 million but at or below $70
million. Of the 697 companies that qualified as small businesses in fiscal
year 2006, two-thirds submitted at least one device application subject to
user fees during that year. These companies were responsible for about 20
percent of the approximately 4,500 device applications subject to user
fees that were submitted to FDA in fiscal year 2006.

We identified annual revenues for 258 publicly traded companies that
submitted applications subject to user fees and did not qualify as small
businesses in fiscal year 2006. Of these companies, 155, or about 60
percent, had annual revenues that were higher than $500 million. Another
47 companies had annual revenues above $100 million but at or below $500
million.

^7Companies that register their securities with SEC, which are referred to
as registrants, may have direct or indirect control of other companies,
which are referred to as their subsidiaries. For the remainder of this
report, "publicly traded company" refers to either a registrant or a
subsidiary of a registrant.

The remaining 56 companies had revenues at or below the current $100
million threshold for small business qualification. We did not determine
why these companies were not qualified as small businesses. In total, the
258 publicly traded companies were responsible for about 30 percent of the
approximately 4,500 applications subject to user fees that were submitted
to FDA in fiscal year 2006.

HHS reviewed a draft of this report and provided technical comments, which
we incorporated as appropriate.

Background

Under the Federal Food, Drug, and Cosmetic Act,^8 FDA is responsible for
ensuring that medical devices are reasonably safe and effective, among
other things, before they become commercially available.^9 Two FDA
centers, the Center for Devices and Radiological Health (CDRH) and the
Center for Biologics Evaluation and Research (CBER), are responsible for
reviewing applications to market medical devices.^10 CDRH reviews
applications for the majority of these devices, such as artificial hearts,
dialysis machines, and radiological devices. CBER reviews applications for
devices used in the testing and manufacture of biological products,
including diagnostic tests intended to screen blood donors (such as for
human immunodeficiency virus (HIV)), as well as therapeutic devices used
in cell and gene therapies.

Under MDUFMA, FDA is authorized to collect user fees from device companies
for some device applications and not others.^11 Companies that are not
qualified small businesses pay the standard user fee for the applications
they submit. Companies that qualify as small businesses by demonstrating
that they meet the $100 million threshold pay a percentage of the standard
user fee, with the amount of the discount depending on the application. In
addition, the subset of companies that qualify as small businesses and
have demonstrated annual revenues at or below $30 million receive a fee
waiver the first time ever they submit one of certain applications that
would have higher fees. Table 1 provides a description of the applications
subject to user fees and the standard and discounted small business fees
for fiscal year 2006.

^8Ch. 675, 52 Stat. 1040 (1938) (codified as amended at 21 U.S.C. SS 301
et seq. (2000)).

^9Under the act, FDA is also responsible for ensuring that medical devices
remain safe after they become commercially available. For example, FDA
inspects medical device companies' manufacturing establishments to assess
compliance with good manufacturing practices.

^10In general, an application to market a medical device includes
information on the device and its components. It also contains proposed
labeling for the device and, when applicable, clinical and nonclinical
studies that provide reasonable assurance of the device's safety and
effectiveness.

^11For example, FDA may charge a user fee for BLAs, which companies submit
to FDA in order to introduce and license biological products for
interstate commerce. MDUFMA does not authorize FDA to charge a fee for a
BLA manufacturing supplement, which is a request to change the manufacture
of an approved biological product and generally does not require
submission of substantive clinical data.

Table 1: Device Applications Subject to User Fees under MDUFMA in Fiscal
Year 2006

                                                                        Small 
                                                                     business 
                                                          Standard   discount 
Application              Purpose of application        user fee user fee^a 
PMA                      Request for approval of a     $259,600    $98,648 
                            device that supports or                           
                            sustains human life, is of                        
                            substantial importance in                         
                            preventing impairment of                          
                            human health, or which                            
                            presents a potential                              
                            unreasonable risk of illness                      
                            or injury                                         
Product Development      An alternative review process  259,600     98,648 
Protocol (PDP)           for a device that would                           
                            otherwise require a PMA; a                        
                            key feature is that the                           
                            applicant and FDA agree in                        
                            advance concerning the data                       
                            that must be developed to                         
                            demonstrate that the device                       
                            is safe and effective                             
Premarket Report         Request for approval of a      259,600     98,648 
                            high-risk device originally                       
                            approved for single use--that                     
                            is, use on a single patient                       
                            during a single                                   
                            procedure--that a                                 
                            manufacturer has reprocessed                      
                            for additional use                                
Panel-track PMA          Request for approval of a      259,600     98,648 
Supplement               significant change in the                         
                            design or performance of an                       
                            approved device, or for a new                     
                            purpose for using the                             
                            approved device, when                             
                            demonstration of reasonable                       
                            assurance of safety and                           
                            effectiveness requires                            
                            significant clinical data                         
180-day PMA Supplements  Request for approval of a       55,814     21,209 
                            significant change in aspects                     
                            of an approved device, such                       
                            as its design,                                    
                            specifications, or labeling,                      
                            when demonstration of                             
                            reasonable assurance of                           
                            safety and effectiveness                          
                            either does not require new                       
                            clinical data or requires                         
                            only limited clinical data                        
Real-time PMA Supplement Request for approval of a       18,691      7,103 
                            minor change to an approved                       
                            device, such as a minor                           
                            change in the design or                           
                            labeling                                          
Premarket                Request for approval of a        3,833      3,066 
Notification/510(k)^b    device that is substantially                      
                            equivalent to a legally                           
                            marketed device that was not                      
                            subject to premarket approval                     
Biologics License        Request for approval to        259,600     98,648 
Application (BLA)        introduce and license                             
                            biological products for                           
                            interstate commerce                               
BLA Efficacy Supplement  A supplement to an approved    259,600     98,648 
                            premarket application that                        
                            requires substantive clinical                     
                            data                                              

Source: FDA.

Note: Companies with annual revenues at or below $30 million receive a fee
waiver the first time ever they submit a PMA, PDP, Premarket Report, or
BLA as a qualified small business.

aThe amount of the discounted user fee for a particular application is
determined by multiplying the standard user fee for that application by a
percentage amount specified by MDUFMA for that application. For PMAs,
PDPs, Premarket Reports, Panel-track PMA Supplements, 180-day PMA
Supplements, Real-time PMA Supplements, BLAs, and BLA Efficacy
Supplements, the percentage is 38 percent. For Premarket Notifications,
the percentage is 80 percent.

bFDA refers to a Premarket Notification submission as a 510(k) because the
requirement for it is set out in S 510(k) of the Federal Food, Drug, and
Cosmetic Act. 21 U.S.C. S 360(k) (2000).

In order to evaluate a company for small business qualification, MDUFMA
requires that FDA verify the "gross sales or receipts" reported on the
most recent federal income tax returns by the company and any affiliate,
partner, or parent firm. Companies must certify that they have furnished
accurate copies of their income tax returns and those of any affiliate,
partner, or parent firm. If a company cannot provide a copy of its most
recent federal income tax return or that of any affiliate, partner, or
parent firm--for example, if the company operates overseas and does not
report some or all of its revenues on federal income tax returns--the
company cannot qualify as a small business.

Most Companies Qualifying as Small Businesses under the MDUFMA User Fee
Program in Fiscal Year 2006 Had Annual Revenues at or below $30 Million

We obtained annual revenues for 697 companies qualifying as small
businesses in fiscal year 2006. (See fig. 1.) According to FDA data, 656
of these companies, or about 95 percent, had revenues at or below $30
million--the threshold for small business qualification originally set by
MDUFMA in 2002. Of the 41 companies that had revenues above $30 million
but at or below the current threshold of $100 million set by MDUFSA in
2005, 35 had revenues above $30 million but at or below $70 million.

Figure 1: Annual Revenues of Companies Qualifying as Small Businesses
under the MDUFMA User Fee Program in Fiscal Year 2006

Note: MDUFMA originally set the threshold for small business qualification
at $30 million. In 2005, MDUFSA modified MDUFMA by, among other things,
raising the threshold for small business qualification to $100 million.

About two-thirds of the 697 companies qualifying as small businesses in
fiscal year 2006 submitted a device application subject to user fees
during that year. Specifically, 439 companies submitted at least one
application that year, and these companies were responsible for about 20
percent of the approximately 4,500 applications subject to user fees that
were submitted to FDA in fiscal year 2006.

Most Publicly Traded Companies That Submitted Device Applications and Were
Not Qualified Small Businesses Had Annual Revenues above $500 Million in
Fiscal Year 2006

We obtained annual revenues for 258 publicly traded companies that
submitted device applications subject to user fees and did not qualify as
small businesses in fiscal year 2006. (See fig. 2.) Using SEC data we
obtained from two private data vendors, we found that 155 of these
companies, or about 60 percent, had annual revenues above $500 million. An
additional 47 companies had annual revenues above $100 million but at or
below $500 million for fiscal year 2006. The remaining 56 companies had
annual revenues at or below the current small business threshold of $100
million, including 4 companies that reported revenues of $0.^12
Altogether, these 258 publicly traded companies were responsible for about
30 percent of the approximately 4,500 applications subject to user fees
that were submitted to FDA in fiscal year 2006. Enclosure II contains more
information on the types and numbers of device applications the companies
submitted.

Figure 2: Annual Revenues for Publicly Traded Companies That Submitted
Device Applications Subject to MDUFMA User Fees in Fiscal Year 2006 and
Did Not Qualify as Small Businesses

^12A company may report annual revenues of $0 if, for example, the company
was new and at the time it filed its report with SEC it had not yet
generated revenues.

We did not determine why each of the 56 publicly traded companies with
annual revenues at or below $100 million was not qualified as a small
business. One possible explanation provided by a medical device industry
representative is that some companies that meet the current threshold for
small business qualification may not apply if the discount in user fees
for the device applications they are likely to submit is relatively small.
Among the 56 companies we found with annual revenues at or below $100
million, all but one of the applications they submitted in fiscal year
2006 were Premarket Notifications. The Premarket Notification is the least
expensive application and subject to the smallest discount. For fiscal
year 2006, the standard user fee amount for the Premarket Notification was
$3,833. In contrast, the user fee for companies qualifying as small
businesses was $3,066.

Agency Comments

HHS reviewed a draft of this report and provided technical comments, which
we incorporated as appropriate.

                                   - - - - -

We are sending copies of this report to the Secretary of Health and Human
Services, the Commissioner of FDA, appropriate congressional committees,
and other interested parties. We will also make copies available to others
on request. In addition, the report will be available at no charge on
GAO's Web site at http://www.gao.gov . If you or your staff have
questions about this report, please contact me at (206) 287-4860 or
[email protected] . Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this report.
GAO staff who made major contributions to this report are listed in
enclosure III.

Sincerely yours,

Randall B. Williamson
Acting Director, Health Care

Enclosures--3

Enclosure I

                             Scope and Methodology

To provide annual revenues for the 697 companies that qualified as small
businesses under the Medical Device User Fee and Modernization Act of 2002
(MDUFMA) user fee program in fiscal year 2006, we obtained from the Food
and Drug Administration (FDA) the number of these companies falling into
$10-million increments of gross sales and receipts from $0 to $100
million. FDA collects and tabulates annual revenue information from tax
returns that these companies provide to FDA as part of the small business
qualification process. In order to qualify as a small business in fiscal
year 2006, a company had to demonstrate that its total annual
revenue--specifically, its gross sales or receipts and that of any
affiliate, partner, or parent firm as recorded on the most recent U.S.
federal income tax returns--did not exceed $100 million.

To provide total annual revenues for publicly traded companies that
submitted device applications subject to user fees and did not qualify as
small businesses in fiscal year 2006, we conducted a multistep analysis:

           o First, we obtained from FDA information on all 4,454 device
           applications the agency received that year that were subject to
           user fees.

           o Second, we obtained from FDA the names and addresses of the 697
           companies that qualified as small businesses under the MDUFMA user
           fee program in fiscal year 2006 and identified the 783 device
           applications they submitted by comparing company names and
           addresses between the 4,454 device applications and the list of
           697 companies.^13 This left 3,671 applications subject to user
           fees that were submitted to FDA in fiscal year 2006 by companies
           that did not qualify as small businesses.

           o Third, we used two private databases containing information on
           publicly traded companies to identify 258 publicly traded
           companies that were responsible for 1,417 of the remaining 3,671
           applications. The first database we used, Audit Analytics,
           contains the names, addresses, and annual revenues of publicly
           traded companies that register their securities with the
           Securities and Exchange Commission (SEC), known as registrants. We
           identified 125 registrants that were responsible for 677 of the
           3,671 applications by comparing company names and addresses
           between the Audit Analytics database and the 3,671 device
           applications. The second private database we used, Mergent,
           contains the names of companies that are subsidiaries of
           registrants. (Audit Analytics does not contain this information.)
           We used Mergent to identify applications submitted by companies
           that were subsidiaries of registrants. We did this by comparing
           subsidiary names with the company names on the remaining
           applications.^14 In total, we identified 133 subsidiary companies
           that were responsible for 740 of the remaining 2,994 applications.

           o Fourth, we used the Audit Analytics database to obtain annual
           revenues for the 258 companies we identified as publicly traded.
           Our methodology was based on FDA's methodology to assess revenues
           for small business qualification. FDA defines a company's annual
           revenue as the gross sales or receipts for that company and any
           affiliate, partner, or parent firm. When a company registers its
           securities with SEC, it must file consolidated financial
           statements indicating annual revenues--specifically, gross
           revenues--from all its operations, including those for its
           subsidiary companies.^15 Therefore, for the 125 companies we
           matched with registrants in the Audit Analytics database, we used
           the annual revenue indicated for those companies in the same
           database. For the 133 companies we identified in Mergent as
           subsidiaries of registrants, we deemed that their associated
           registrants would be affiliate, partner, or parent firms;
           therefore, we used the annual revenue for the registrant indicated
           in the Audit Analytics database as the annual revenue for the
           subsidiary company.

^13To determine whether an application belonged to a company on the list
of qualified small businesses, we compared the names and addresses listed
on the application and the list. If the names and addresses matched
exactly, we considered the application to belong to the company. We also
considered an application to belong to a company if we deemed the match
was probable in that the two names were very similar. This methodology for
comparison of company names and addresses was used throughout our
analyses.

^14Subsidiary address information was not available in Mergent. Therefore,
we matched applications to the Mergent database using name alone.

Once we identified applications submitted by companies qualifying as small
businesses and applications submitted by publicly traded companies, 2,254
applications remained--about 50 percent of all 4,454 applications subject
to user fees in fiscal year 2006. These applications are likely from
companies that are private.

After assessing the reliability of FDA data and SEC data compiled by Audit
Analytics and Mergent, we found that both sets of data were suitable for
our purposes. We assessed the reliability of FDA data by conducting
interviews with FDA staff to understand how FDA collects and uses the
data. We assessed the reliability of data from the two private data
vendors by comparing financial information in SEC filings with financial
information provided by the vendors for a sample of companies. To gather
information about the MDUFMA user fee program, we interviewed officials
from FDA, including officials from the two centers within FDA responsible
for reviewing applications for medical devices--the Center for Devices and
Radiological Health and the Center for Biologics Evaluation and Research.
In addition, we interviewed representatives from a national trade
association--the Medical Device Manufacturers Association--which
represents manufacturers of medical devices. We conducted our work from
October 2006 through March 2007 according to generally accepted government
auditing standards.

^15Both "gross sales or receipts" as reported on federal income tax
returns and gross revenues as reported on a company's financial statement
filed with SEC are general measures of annual revenue. However, they may
not be identical for the same period. Taxable income reported on the tax
return is computed in accordance with prescribed federal tax regulations
and rules, whereas, pretax financial income reported on financial
statements filed with SEC is measured in accordance with generally
accepted accounting principles (GAAP). Because tax regulations and GAAP
are different in many ways, taxable income and pretax financial income can
differ.

Enclosure II

 Information on Device Applications Submitted by Publicly Traded Companies Not
      Qualified as Small Businesses, Categorized by Annual Company Revenue

Under MDUFMA, medical device companies must pay user fees when they submit
certain device applications. These applications are as follows:

           o Original Premarket Approvals (PMA)

           o Product Development Protocols (PDP)

           o Premarket Reports

           o Panel-track PMA Supplements

           o 180-day PMA Supplements

           o Real-time PMA Supplements

           o Premarket Notifications/510(k)s

           o Biologics License Applications (BLA)

           o BLA Efficacy Supplements

In table 2, we provide detailed results of our analysis of device
applications from companies publicly traded in the United States that
submitted device applications subject to user fees and did not qualify as
small businesses. We derived these results by obtaining application
information from FDA, excluding applications from companies qualifying for
small business discounts and waivers, and matching the companies
responsible for the remaining applications to the revenues they reported
to SEC, which we obtained from two private data vendors, Audit Analytics
and Mergent.

Table 2: Annual Revenues for 258 Publicly Traded Companies Not Qualified
as Small Businesses, Categorized by the Number of Device Applications per
Application Type, in Fiscal Year 2006

                                          Application type (fee in dollars)                                              
Annual                          Premarket                                                                                
revenue                                               Panel-Track 180-Day    Real-Time  BLA                              
(millions            PDP        Report                PMA         PMA        PMA        Efficacy   510(k)                
of        PMA                              BLA        Supplement  Supplement Supplement Supplement                       
dollars)  ($259,600) ($259,600) ($259,600) ($259,600) ($259,600)  ($55,814)  ($18,691)  ($259,600) ($3,833)              
$0                 0          0          0          0           0          0          0          0        4 Companies    
              0    0          0          0          0           0          0          0              13 Applications
>$1 to             1          0          0          0           0          0          0          0       21 Companies    
=<$25         1    0          0          0          0           0          0          0              33 Applications
>$25 to            0          0          0          0           0          0          0          0       11 Companies    
=<$50         0    0          0          0          0           0          0          0              31 Applications
>$50 to            0          0          0          0           1          0          0          0       10 Companies    
=<$75         0    0          0          0          1           0          0          0              20 Applications
>$75 to            0          0          0          0           0          0          0          0        8 Companies    
=<$100        0    0          0          0          0           0          0          0              18 Applications
>$100 to           0          0          0          0           0          1          1          0        8 Companies    
=<$125        0    0          0          0          0           1          7          0              14 Applications
>$125 to           0          0          0          0           0          0          0          0        5 Companies    
=<$150        0    0          0          0          0           0          0          0               7 Applications
>$150 to           0          0          0          0           1          1          1          0        2 Companies    
=<$175        0    0          0          0          1           1          1          0               3 Applications
>$175 to           0          0          0          0           0          0          0          0        4 Companies    
=<$200        0    0          0          0          0           0          0          0               9 Applications
>$200 to           1          0          0          0           0          2          1          0        6 Companies    
=<$300        1    0          0          0          0           2          1          0              25 Applications
>$300 to           0          0          0          0           0          1          3          0       12 Companies    
=<$400        0    0          0          0          0           2          5          0              61 Applications
>$400 to           0          0          0          0           0          1          0          0        4 Companies    
=<$500        0    0          0          0          0           2          0          0              12 Applications
>$500 to           0          0          0          0           0          0          1          0       10 Companies    
=<$600        0    0          0          0          0           0          1          0              22 Applications
>$600 to           0          0          0          0           0          0          0          0        5 Companies    
=<$700        0    0          0          0          0           0          0          0              18 Applications
>$700 to           0          0          0          0           0          0          0          0        1 Companies    
=<$800        0    0          0          0          0           0          0          0               2 Applications
>$800 to           0          0          0          0           0          0          0          0        3 Companies    
=<$900        0    0          0          0          0           0          0          0               4 Applications
>$900 to           0          0          0          0           0          0          0          0        0 Companies    
=<$1,000                                                                                                                 
                   0          0          0          0           0          0          0          0        0 Applications 
More than         12          0          0          2           8         20         22          0      129 Companies    
$1,000                                                                                                                   
                  21          0          0          2           8         78        216          0      759 Applications 

Source: GAO analysis of FDA, Audit Analytics, and Mergent data.

Note: Shading for emphasis only. In addition, individual companies may
appear in more than one column in the same row if they submit more than
one type of application. As a result, the number of companies in this
table does not sum to 258.

                     GAO Contact and Staff Acknowledgments

GAO Contact

Randall B. Williamson, (206) 287-4860 or [email protected]

Acknowledgments

In addition to the contact named above, James Musselwhite, Assistant
Director; Donald Neff, Assistant Director; Ramsey Asaly; Cathy Hamann;
Jessica Morris; Daniel Ries; and Yorick F. Uzes made key contributions to
this report.

(290610)

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